Supreme Court overturns Drelle and restores the use of foreign judgments in English bankruptcy proceedings

Eighteen months after the Court of Appeal’s decision in Servis-Terminal LLC v Drelle appeared to raise a significant new obstacle to cross-border recovery efforts, the Supreme Court has now unanimously overturned that decision and restored the ability of foreign judgment creditors to rely upon qualifying foreign judgments as the basis for English bankruptcy proceedings.

In February 2025, we examined the Court of Appeal’s decision in Servis-Terminal LLC v Drelle, in which the Court concluded that an unrecognised foreign judgment could not be relied upon as the basis of a bankruptcy petition in England and Wales. At the time, we noted that the decision represented a significant development in cross-border insolvency law and created an additional procedural hurdle for foreign judgment creditors seeking to utilise English insolvency processes.

The UK Supreme Court has now unanimously overturned that decision in Drelle v Servis-Terminal LLC (In Liquidation in the Russian Federation) [2026] UKSC 29, fundamentally altering the position once again and restoring what many considered to be the orthodox common law approach to foreign judgment debts.

The judgment will be of significant interest to insolvency practitioners, office-holders, fraud victims and international creditors. It is likely to be particularly relevant to parties seeking to recover debts based upon foreign court judgments where the debtor has assets or a presence in England.

Background

As a reminder, the case arose from a Russian judgment obtained by Servis-Terminal LLC (a Russian company in liquidation) against its former director, Mr Drelle, for approximately RUB 2 billion. After extensive proceedings and unsuccessful appeals in Russia, Servis-Terminal sought to rely upon the Russian judgment as the basis for a bankruptcy petition in England.

The central question was whether an unrecognised foreign judgment constituted a “debt” for the purposes of section 267 of the Insolvency Act 1986 (IA 1986).

A reminder of the Court of Appeal’s approach 

As discussed in our previous article, the Court of Appeal answered that question in the negative. The Court of Appeal held that an unrecognised foreign judgment could not constitute a “debt” for the purposes of section 267 IA 1986. In practical terms, this meant that a creditor holding a foreign judgment first had to obtain recognition of that judgment in England before relying upon it as the basis for a bankruptcy petition.

The decision was viewed by many commentators as increasing the cost and complexity of cross-border recovery efforts. It effectively required creditors to undertake an additional and often complex recognition exercise before obtaining access to the insolvency regime.

As was envisioned, Servis-Terminal appealed to the Supreme Court. 

The Supreme Court’s judgment

The Supreme Court unanimously allowed Servis-Terminal’s appeal and overturned the Court of Appeal’s decision. The central issue before the Court was whether an unrecognised and unregistrable foreign judgment for a debt or definite sum of money could nevertheless constitute a “debt” for the purposes of section 267 IA 1986.

The Supreme Court held that it could. 

In doing so, the Court returned to first principles concerning the legal effect of foreign judgments under English common law. The Supreme Court held that where a foreign judgment is final, conclusive and issued by a court of competent jurisdiction, it gives rise to an immediate common law obligation to pay the judgment debt. That obligation exists irrespective of whether the judgment has been recognised in England and Wales.

In reaching this conclusion, the Supreme Court reaffirmed the long-established “obligation principle” and rejected the Court of Appeal’s finding that an unrecognised foreign judgment has no legal effect until recognised. The Court emphasised that whilst a foreign judgment does not have the same enforcement mechanisms as an English judgment, this does not mean that it is devoid of legal effect.

Having found that an unrecognised foreign judgment gives rise to a legal obligation to pay, the Supreme Court concluded that such an obligation constitutes a “debt” for the purposes of section 267 IA 1986.

The Supreme Court noted that IA 1986 does not define “debt” and that the ordinary common law meaning of the term is sufficiently broad to encompass an obligation arising under an unrecognised foreign judgment. Accordingly, a creditor may rely upon such a judgment as the basis for a bankruptcy petition.

Why the decision matters

The judgment removes a potentially significant procedural obstacle for foreign judgment creditors.

Whilst an unrecognised foreign judgment remains incapable of direct enforcement through the ordinary mechanisms available for English judgments, the Supreme Court has drawn an important distinction between enforcement and the existence of a debt. The fact that a judgment cannot be directly enforced does not mean that the underlying obligation to pay does not exist.

For creditors, this means that insolvency remedies may once again be available without first obtaining a separate recognition judgment in England. 

The decision is therefore likely to reduce cost, delay and procedural complexity in certain cross-border recovery scenarios and strengthen the position of creditors seeking to deploy insolvency tools as part of a broader asset recovery strategy.

Implications for cross-border recovery and foreign judgment creditors

The Supreme Court’s decision reinforces England’s position as a leading jurisdiction for international insolvency and restructuring matters.

The Court’s approach aligns with the long-standing principle that foreign judgments may give rise to obligations recognised by the common law, even where separate recognition proceedings have not yet been pursued. By overturning the Court of Appeal’s decision, the Supreme Court has restored greater certainty for international creditors and office-holders operating across multiple jurisdictions. 

The judgment may be expected to attract particular attention from foreign practitioners advising clients with judgment debts against individuals or entities located in England.

In our previous article on Servis-Terminal LLC v Drelle, we noted that the Court of Appeal’s decision created an additional procedural hurdle for creditors holding foreign judgments from jurisdictions such as China, Brazil and the United States, requiring separate recognition proceedings before a bankruptcy petition could be presented. The Supreme Court has now overturned that position, confirming that a final and conclusive foreign judgment can itself constitute a petition debt for the purposes of section 267 IA 1986, even where it has not first been recognised in England and Wales.

This is particularly significant for creditors from the above-mentioned jurisdictions where recognition ordinarily proceeds under common law principles rather than a reciprocal statutory regime. Whilst foreign judgment creditors may still wish to seek recognition in England for enforcement purposes, the Supreme Court’s decision confirms that recognition is not necessarily a prerequisite to pursuing insolvency remedies.

Conclusion

When we wrote about Servis-Terminal LLC v Drelle in February 2025, the Court of Appeal’s decision appeared to signal a more restrictive approach to the interaction between foreign judgments and English insolvency proceedings. The Supreme Court has now reversed that position.

By confirming that a qualifying foreign judgment can give rise to a petition debt without prior recognition proceedings, the Supreme Court has restored a potentially powerful route for international creditors seeking recovery in England.